The three best ideas in Obama’s budget

April 11, 2013

President Obama's 2014 budget is 244 pages — and that's before you get into the historical tables. Wonkblog already took a look at 12 of the more important ideas that are likely to get lost in the coverage. But here are the three best ideas in the document:


A smoker holds a lit cigarette. (Carl Court/Bloomberg News)

Funding pre-K through a cigarette tax. Pages 21 and 22 of the budget describe the "Preschool for All" proposal, which aims, "in partnership with the States, to provide all low- and moderate-income four-year-old children with high-quality preschool, while also incentivizing States to expand these programs to reach additional children from middle class families and establish full-day kindergarten policies."

In other words, pre-K for all, or at least for almost everybody. Let's not understate how hard this will be: The evidence is clear that high-quality pre-K is perhaps the most significant investment we can make in a child's future, but making sure the pre-K is of high quality is not easy to do.

One thing it requires, in particular, is money. And so the Obama administration is proposing to fund it by raising the federal cigarette tax from $1.01 to $1.95 per pack. That would net $78 billion for pre-K, but the beauty of the approach is that the tobacco tax also accomplishes an important goal. Namely: "Researchers have found that raising taxes on cigarettes significantly reduces consumption, with especially large effects on youth smoking."

This is, as many liberals point out, a regressive way to raise taxes. But that just exposes the shortfalls of judging any and every tax based on its direct progressivity and regressivity. Making it particularly expensive for lower-income people to be become addicted or remain addicted to cigarettes will mean fewer lower-income folks become addicted or remain addicted to cigarettes. In that way, it's a regressive tax with two very progressive benefits: Less cigarette addiction, and near-universal pre-K.

But that's not necessarily a majority opinion. "The purpose of social policy needs to be to help smokers, not to punish them," says Harold Pollack, a public-health specialist at the University of Chicago. "On balance, I'm on board, because this policy would accomplish much good. But I would like to see a greater proportion of tobacco tax revenues used to support tobacco control measures for prevention, smoking cessation, and treatment of smoking-related illnesses."

Still, I'm a fan of this swap. The more worrying critique is the one Brad Plumer identifies: The tobacco tax won't, in the long run, be sufficient to fund the pre-K program. So putting the policy on sound financial footing after the first 10 years will require money from other sources, too.


(Source: Andrew Harrer/Bloomberg)

Capping itemized deductions at 28 percent. The two tax policies getting the most attention in the budget this year are the so-called "Buffett rule," which would set an effective minimum tax rate of 30 percent on richer Americans, and the so-called "Romney rule," which would limit IRAs to $3 million. But neither policy is where the White House's heart is.

You remember that guy in high school who kept asking that one girl to the prom, even though she said no every single year? That's the Obama administration on capping itemized deductions. This has been in every single one of their budgets since they came into office. It hasn't passed. But they keep trying. They just love it that much.

It's also the policy that nets them most of their revenue. And while it hasn't cleared Congress yet, it also makes political sense. "Everybody runs around this town saying I'm for broadening the base and lowering the rates, but they're terrified to identify particular loopholes," says Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities who formerly served as Vice President Biden's chief economist. "The deduction cap gets around that by proportionately whacking everything. It's an efficient way of broadening the base without invoking specific interest group rage."

Which isn't to say there'll be no rage. About 90 percent of the itemized deductions that richer taxpayers take are for charitable contributions, the mortgage-interest deduction, or the state and local tax deduction. So this tax change will act as a cap on subsidies for these three activities.


Obama signs his health-care reform bill into law. (Marvin Joseph/The Washington Post)

Implementing the Affordable Care Act. This isn't often thought of as part of "the budget." But it's right there, on page 26. And correctly so. The Affordable Care Act will have a huge effect both on the federal budget and national health-care costs in the coming decades. Getting it right could solve many of our budget problems. Getting it wrong could exacerbate them.

Republicans are working very, very hard to see that the administration gets it wrong. After failing to either repeal the law or get it declared unconstitutional, they've retrenched to a strategy of harassment and intransigence. Republican governors are refusing to set up either the insurance exchanges or the Medicaid expansions. Republican congressmen are refusing to appropriate the necessary implementation funds. The basic idea seems to be that if they can't have this health-care system, then no one can.

That's put an incredible burden on the administration. They thought they'd be setting up, at most, a few of the health-insurance exchanges, with the rest left to the states — which is, for the record, how both governors and Republicans wanted it. Instead, they're setting up 33 of the exchanges. They thought the Medicaid expansion would be a smooth enlargement of the program. Instead they're in protracted negotiations with governor after governor demanding new and untested reforms as the cost of their participation.

Whether they succeed is arguably the central question of Obama's second term. The Affordable Care Act doesn't just expand insurance coverage to 30 million more Americans. It begins the work of moving Medicare from fee-for-service to pay-for-quality, and of capping the deduction for employer health benefits, and of cracking down on preventable readmissions, and of setting up highly competitive insurance markets, and of doing a dozen other things that have a real chance at helping us control costs in the coming years. Republicans haven't realized it yet, but its success is our success, and its failure is our failure.

SECTION: {section=business, subsection=null}!!!
INITIAL commentConfig: {includereply=true, canvas_permalink_id=washpost.com/8bvh5zpd9k, allow_comments=true, commentmaxlength=2000, includeshare=true, display_comments=true, canvas_permalink_app_instance=m6yzjj840m, moderationrequired=false, display_more=true, includefeaturenotification=true, comments_period=14, canvas_allcomments_id=washpost.com/km4ey0dajm, defaultsort=reverseChronological, includevoteofftopic=false, allow_videos=false, childrenitemsperpage=3, markerdisplay=post_commenter:Post Commenter|staff:Post Writer|top_commenter:Post Forum|top_local:Washingtologist|top_sports:SuperFan|fact_checker:Fact Checker|post_recommended:Post Recommended|world_watcher:World Watcher|cultuer_connoisseur:Culture Connoisseur|weather_watcher:Capital Weather Watcher|post_contributor:Post Contributor, includesorts=true, includeheader=true, defaulttab=all, includeverifiedcommenters=true, includerecommend=true, maxitemstop=2, includereport=true, source=washpost.com, allow_photos=false, maxitems=7, includepause=true, display_ugc_photos=false, canvas_allcomments_app_instance=6634zxcgfd, includepermalink=false}!!!

UGC FROM ARTICLE: !!!

FINAL commentConfig: {includereply=true, canvas_permalink_id=washpost.com/8bvh5zpd9k, allow_comments=true, commentmaxlength=2000, includeshare=true, display_comments=true, canvas_permalink_app_instance=m6yzjj840m, moderationrequired=false, display_more=true, includefeaturenotification=true, comments_period=14, canvas_allcomments_id=washpost.com/km4ey0dajm, defaultsort=reverseChronological, includevoteofftopic=false, allow_videos=false, childrenitemsperpage=3, markerdisplay=post_commenter:Post Commenter|staff:Post Writer|top_commenter:Post Forum|top_local:Washingtologist|top_sports:SuperFan|fact_checker:Fact Checker|post_recommended:Post Recommended|world_watcher:World Watcher|cultuer_connoisseur:Culture Connoisseur|weather_watcher:Capital Weather Watcher|post_contributor:Post Contributor, includesorts=true, includeheader=true, defaulttab=all, includeverifiedcommenters=true, includerecommend=true, maxitemstop=2, includereport=true, source=washpost.com, allow_photos=false, maxitems=7, includepause=true, display_ugc_photos=false, canvas_allcomments_app_instance=6634zxcgfd, includepermalink=false}!!
Comments
SECTION: {section=business, subsection=null}!!!
INITIAL commentConfig: {includereply=true, canvas_permalink_id=washpost.com/8bvh5zpd9k, allow_comments=true, commentmaxlength=2000, includeshare=true, display_comments=true, canvas_permalink_app_instance=m6yzjj840m, moderationrequired=false, display_more=true, includefeaturenotification=true, comments_period=14, canvas_allcomments_id=washpost.com/km4ey0dajm, defaultsort=reverseChronological, includevoteofftopic=false, allow_videos=false, childrenitemsperpage=3, markerdisplay=post_commenter:Post Commenter|staff:Post Writer|top_commenter:Post Forum|top_local:Washingtologist|top_sports:SuperFan|fact_checker:Fact Checker|post_recommended:Post Recommended|world_watcher:World Watcher|cultuer_connoisseur:Culture Connoisseur|weather_watcher:Capital Weather Watcher|post_contributor:Post Contributor, includesorts=true, includeheader=true, defaulttab=all, includeverifiedcommenters=true, includerecommend=true, maxitemstop=2, includereport=true, source=washpost.com, allow_photos=false, maxitems=7, includepause=true, display_ugc_photos=false, canvas_allcomments_app_instance=6634zxcgfd, includepermalink=false}!!!

UGC FROM ARTICLE: !!!

FINAL commentConfig: {includereply=true, canvas_permalink_id=washpost.com/8bvh5zpd9k, allow_comments=true, commentmaxlength=2000, includeshare=true, display_comments=true, canvas_permalink_app_instance=m6yzjj840m, moderationrequired=false, display_more=true, includefeaturenotification=true, comments_period=14, canvas_allcomments_id=washpost.com/km4ey0dajm, defaultsort=reverseChronological, includevoteofftopic=false, allow_videos=false, childrenitemsperpage=3, markerdisplay=post_commenter:Post Commenter|staff:Post Writer|top_commenter:Post Forum|top_local:Washingtologist|top_sports:SuperFan|fact_checker:Fact Checker|post_recommended:Post Recommended|world_watcher:World Watcher|cultuer_connoisseur:Culture Connoisseur|weather_watcher:Capital Weather Watcher|post_contributor:Post Contributor, includesorts=true, includeheader=true, defaulttab=all, includeverifiedcommenters=true, includerecommend=true, maxitemstop=2, includereport=true, source=washpost.com, allow_photos=false, maxitems=7, includepause=true, display_ugc_photos=false, canvas_allcomments_app_instance=6634zxcgfd, includepermalink=false}!!
Show Comments
April 11, 2013

President Obama's 2014 budget is 244 pages — and that's before you get into the historical tables. Wonkblog already took a look at 12 of the more important ideas that are likely to get lost in the coverage. But here are the three best ideas in the document:


A smoker holds a lit cigarette. (Carl Court/Bloomberg News)

Funding pre-K through a cigarette tax. Pages 21 and 22 of the budget describe the "Preschool for All" proposal, which aims, "in partnership with the States, to provide all low- and moderate-income four-year-old children with high-quality preschool, while also incentivizing States to expand these programs to reach additional children from middle class families and establish full-day kindergarten policies."

In other words, pre-K for all, or at least for almost everybody. Let's not understate how hard this will be: The evidence is clear that high-quality pre-K is perhaps the most significant investment we can make in a child's future, but making sure the pre-K is of high quality is not easy to do.

One thing it requires, in particular, is money. And so the Obama administration is proposing to fund it by raising the federal cigarette tax from $1.01 to $1.95 per pack. That would net $78 billion for pre-K, but the beauty of the approach is that the tobacco tax also accomplishes an important goal. Namely: "Researchers have found that raising taxes on cigarettes significantly reduces consumption, with especially large effects on youth smoking."

This is, as many liberals point out, a regressive way to raise taxes. But that just exposes the shortfalls of judging any and every tax based on its direct progressivity and regressivity. Making it particularly expensive for lower-income people to be become addicted or remain addicted to cigarettes will mean fewer lower-income folks become addicted or remain addicted to cigarettes. In that way, it's a regressive tax with two very progressive benefits: Less cigarette addiction, and near-universal pre-K.

But that's not necessarily a majority opinion. "The purpose of social policy needs to be to help smokers, not to punish them," says Harold Pollack, a public-health specialist at the University of Chicago. "On balance, I'm on board, because this policy would accomplish much good. But I would like to see a greater proportion of tobacco tax revenues used to support tobacco control measures for prevention, smoking cessation, and treatment of smoking-related illnesses."

Still, I'm a fan of this swap. The more worrying critique is the one Brad Plumer identifies: The tobacco tax won't, in the long run, be sufficient to fund the pre-K program. So putting the policy on sound financial footing after the first 10 years will require money from other sources, too.


(Source: Andrew Harrer/Bloomberg)

Capping itemized deductions at 28 percent. The two tax policies getting the most attention in the budget this year are the so-called "Buffett rule," which would set an effective minimum tax rate of 30 percent on richer Americans, and the so-called "Romney rule," which would limit IRAs to $3 million. But neither policy is where the White House's heart is.

You remember that guy in high school who kept asking that one girl to the prom, even though she said no every single year? That's the Obama administration on capping itemized deductions. This has been in every single one of their budgets since they came into office. It hasn't passed. But they keep trying. They just love it that much.

It's also the policy that nets them most of their revenue. And while it hasn't cleared Congress yet, it also makes political sense. "Everybody runs around this town saying I'm for broadening the base and lowering the rates, but they're terrified to identify particular loopholes," says Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities who formerly served as Vice President Biden's chief economist. "The deduction cap gets around that by proportionately whacking everything. It's an efficient way of broadening the base without invoking specific interest group rage."

Which isn't to say there'll be no rage. About 90 percent of the itemized deductions that richer taxpayers take are for charitable contributions, the mortgage-interest deduction, or the state and local tax deduction. So this tax change will act as a cap on subsidies for these three activities.


Obama signs his health-care reform bill into law. (Marvin Joseph/The Washington Post)

Implementing the Affordable Care Act. This isn't often thought of as part of "the budget." But it's right there, on page 26. And correctly so. The Affordable Care Act will have a huge effect both on the federal budget and national health-care costs in the coming decades. Getting it right could solve many of our budget problems. Getting it wrong could exacerbate them.

Republicans are working very, very hard to see that the administration gets it wrong. After failing to either repeal the law or get it declared unconstitutional, they've retrenched to a strategy of harassment and intransigence. Republican governors are refusing to set up either the insurance exchanges or the Medicaid expansions. Republican congressmen are refusing to appropriate the necessary implementation funds. The basic idea seems to be that if they can't have this health-care system, then no one can.

That's put an incredible burden on the administration. They thought they'd be setting up, at most, a few of the health-insurance exchanges, with the rest left to the states — which is, for the record, how both governors and Republicans wanted it. Instead, they're setting up 33 of the exchanges. They thought the Medicaid expansion would be a smooth enlargement of the program. Instead they're in protracted negotiations with governor after governor demanding new and untested reforms as the cost of their participation.

Whether they succeed is arguably the central question of Obama's second term. The Affordable Care Act doesn't just expand insurance coverage to 30 million more Americans. It begins the work of moving Medicare from fee-for-service to pay-for-quality, and of capping the deduction for employer health benefits, and of cracking down on preventable readmissions, and of setting up highly competitive insurance markets, and of doing a dozen other things that have a real chance at helping us control costs in the coming years. Republicans haven't realized it yet, but its success is our success, and its failure is our failure.

SECTION: {section=business, subsection=null}!!!
INITIAL commentConfig: {includereply=true, canvas_permalink_id=washpost.com/8bvh5zpd9k, allow_comments=true, commentmaxlength=2000, includeshare=true, display_comments=true, canvas_permalink_app_instance=m6yzjj840m, moderationrequired=false, display_more=true, includefeaturenotification=true, comments_period=14, canvas_allcomments_id=washpost.com/km4ey0dajm, defaultsort=reverseChronological, includevoteofftopic=false, allow_videos=false, childrenitemsperpage=3, markerdisplay=post_commenter:Post Commenter|staff:Post Writer|top_commenter:Post Forum|top_local:Washingtologist|top_sports:SuperFan|fact_checker:Fact Checker|post_recommended:Post Recommended|world_watcher:World Watcher|cultuer_connoisseur:Culture Connoisseur|weather_watcher:Capital Weather Watcher|post_contributor:Post Contributor, includesorts=true, includeheader=true, defaulttab=all, includeverifiedcommenters=true, includerecommend=true, maxitemstop=2, includereport=true, source=washpost.com, allow_photos=false, maxitems=7, includepause=true, display_ugc_photos=false, canvas_allcomments_app_instance=6634zxcgfd, includepermalink=false}!!!

UGC FROM ARTICLE: !!!

FINAL commentConfig: {includereply=true, canvas_permalink_id=washpost.com/8bvh5zpd9k, allow_comments=true, commentmaxlength=2000, includeshare=true, display_comments=true, canvas_permalink_app_instance=m6yzjj840m, moderationrequired=false, display_more=true, includefeaturenotification=true, comments_period=14, canvas_allcomments_id=washpost.com/km4ey0dajm, defaultsort=reverseChronological, includevoteofftopic=false, allow_videos=false, childrenitemsperpage=3, markerdisplay=post_commenter:Post Commenter|staff:Post Writer|top_commenter:Post Forum|top_local:Washingtologist|top_sports:SuperFan|fact_checker:Fact Checker|post_recommended:Post Recommended|world_watcher:World Watcher|cultuer_connoisseur:Culture Connoisseur|weather_watcher:Capital Weather Watcher|post_contributor:Post Contributor, includesorts=true, includeheader=true, defaulttab=all, includeverifiedcommenters=true, includerecommend=true, maxitemstop=2, includereport=true, source=washpost.com, allow_photos=false, maxitems=7, includepause=true, display_ugc_photos=false, canvas_allcomments_app_instance=6634zxcgfd, includepermalink=false}!!
Comments
SECTION: {section=business, subsection=null}!!!
INITIAL commentConfig: {includereply=true, canvas_permalink_id=washpost.com/8bvh5zpd9k, allow_comments=true, commentmaxlength=2000, includeshare=true, display_comments=true, canvas_permalink_app_instance=m6yzjj840m, moderationrequired=false, display_more=true, includefeaturenotification=true, comments_period=14, canvas_allcomments_id=washpost.com/km4ey0dajm, defaultsort=reverseChronological, includevoteofftopic=false, allow_videos=false, childrenitemsperpage=3, markerdisplay=post_commenter:Post Commenter|staff:Post Writer|top_commenter:Post Forum|top_local:Washingtologist|top_sports:SuperFan|fact_checker:Fact Checker|post_recommended:Post Recommended|world_watcher:World Watcher|cultuer_connoisseur:Culture Connoisseur|weather_watcher:Capital Weather Watcher|post_contributor:Post Contributor, includesorts=true, includeheader=true, defaulttab=all, includeverifiedcommenters=true, includerecommend=true, maxitemstop=2, includereport=true, source=washpost.com, allow_photos=false, maxitems=7, includepause=true, display_ugc_photos=false, canvas_allcomments_app_instance=6634zxcgfd, includepermalink=false}!!!

UGC FROM ARTICLE: !!!

FINAL commentConfig: {includereply=true, canvas_permalink_id=washpost.com/8bvh5zpd9k, allow_comments=true, commentmaxlength=2000, includeshare=true, display_comments=true, canvas_permalink_app_instance=m6yzjj840m, moderationrequired=false, display_more=true, includefeaturenotification=true, comments_period=14, canvas_allcomments_id=washpost.com/km4ey0dajm, defaultsort=reverseChronological, includevoteofftopic=false, allow_videos=false, childrenitemsperpage=3, markerdisplay=post_commenter:Post Commenter|staff:Post Writer|top_commenter:Post Forum|top_local:Washingtologist|top_sports:SuperFan|fact_checker:Fact Checker|post_recommended:Post Recommended|world_watcher:World Watcher|cultuer_connoisseur:Culture Connoisseur|weather_watcher:Capital Weather Watcher|post_contributor:Post Contributor, includesorts=true, includeheader=true, defaulttab=all, includeverifiedcommenters=true, includerecommend=true, maxitemstop=2, includereport=true, source=washpost.com, allow_photos=false, maxitems=7, includepause=true, display_ugc_photos=false, canvas_allcomments_app_instance=6634zxcgfd, includepermalink=false}!!
Show Comments
Next Story
Dylan Matthews | April 11, 2013